fbpx

Break-even ROAS

You must first reach the break-even ROAS point in your advertising campaigns before considering scaling an e-commerce business economically utilizing sponsored advertising. You’re now exposing your company to the possibility of a large number of new clients, which translates into a bigger net profit each month.

It’s a good idea to incorporate paid advertising into your overall growth strategy, but you need to be sure about what ROAS stands for in marketing. You can do it profitably or you risk losing money.

You’ll undoubtedly discover that you end up paying more than twice to produce paid ad sales, compared to marketplaces that take a 15% sales acquisition cut. This is why while setting up, it’s crucial to be sure you are familiar with all of your numbers.

    COGS

    Selling Price

    Cost Multiplier

    Profit Margin

    B.E. ROAS

    How to use Break-even ROAS calculator

    The formula for break-even ROAS is the following:

    1 / Average Net Profit Margin

     

    However, there are a few stages involved in the return on ad spend calculator.

    Average order value/cost of items supplied in

    Step 1: AOV/COG = net profit

    Step 2: Net profit/AOV*1 = net profit margin

     

    You should take the time to calculate these values carefully. You run the risk of skewing the data if you simply assume any of your input numbers, such as COGs (cost of goods), for instance.

    If this happens, it can have a domino effect and your break-even ROAS may turn out to be lower than it is now.

    Frequently Asked Questions

    What is ROAS?

    ROAS, or return on advertising spend, is essentially a measurement of how much revenue you generate for every dollar you spend on advertising. You can use the ROAS definition to assess the general success of your digital marketing initiatives or to focus on assessing the success of a particular campaign or ad group.

    ROAS calculation lies in determining the money your campaigns have brought in. You need to divide it by the amount you spent on advertising, then multiply the result by 100 to get your ROAS.

    If, for example, your total ad expenditure in February was $10,000 and you generated $20,000 in income from all of your campaigns, here is how you would determine your ROAS calculation formula:

    ROAS = $20,000 / $10,000 x 100 = 200%

    Although some individuals determine ROAS as a percentage, others may prefer to express ROAS as a multiple, a ratio, or a monetary number.

    What is a good ROAS?

    Is the 300% ROAS in our case above a good return? It varies.

    A 300% ROAS means that you made $2 after spending $20 on the advertising campaign.

    However, your margin decreases further if you have to use the $2 to cover other expenditures like employee salaries, delivery charges, or PayPal fees (if you’re collecting money via PayPal).

    Although every company has a particular set of goals for its marketing and advertising initiatives, the majority are geared toward increasing sales and, ultimately, profits. Therefore, if you want to safeguard your net profit margin, you must construct some margin of safety in your return on ad spend calculator. Therefore, a healthy ROAS is followed by profitability once less evident advertising expenditures, such as vendor fees, commissions, transaction fees, and other business expenses, have been taken into account.

    How to Calculate Break-Even ROAS for an E-Commerce Store With Multiple Products?

    Your online store’s average profit margin percentage will be consistent whether you only sell one item, or if all of your items are priced the same. This makes the aforementioned break-even ROAS calculation quick and simple.

    On the other hand, you won’t have a constant unit profit margin percentage for all of your products if your store sells a range of goods at various prices and with different cost structures. How do you calculate ROAS in this case? It is best to calculate an acceptable average profit margin percentage estimate utilizing the overall average order value and the average cost of items sold for your store.

    Why is it Important to Pre-Calculate Your Profit Using the ROAS Calculator?

    The Break Even ROAS calculation is crucial.

    For each campaign, ad set/ad group, and ad social media, such as Facebook, TikTok, and Snapchat provide the ROAS. As a result, you can monitor the effectiveness of that particular aspect of your web marketing campaign on many levels.

    A ROAS of 1 indicates that you are investing the same amount of money that you are converting into profits. Facebook, TikTok, and Snapchat will show a ROAS of 1 if you invest €10 to sell a €10 product. This essentially means you make a profit. However, you must also factor in additional expenses when determining your target ROAS and if you want to know how to calculate ad spend accurately. For instance, the price of the items, shipping, transaction, and possibly other charges.

    Social Media ROAS – ROI Calculator

    Unit Economics Calculator

    Project

    Our Success Stories

    TikTok - Сontent Сreation

    How to generate $217k in revenue with TikTok Ads

    For the last year we’ve been testing, experimenting, proving and disproving various hypotheses and generally running TikTok Ads a lot. And today I wanna share with you the results of one of our clients and even more, I’ll reveal the approaches and tricks we used to achieve these results

    TikTok - Сontent Сreation

    Mindblowing TikTok Ads Case Study: ROAS 7.49 with $110k+ revenue

    We want to reveal what (and how) we did to achieve these truly amazing results for one of our agency’s clients.

    TikTok - Сontent Сreation

    Mindblowing TikTok Ads Case Study: ROAS 7.49 with $110k+ revenue

    We want to reveal what (and how) we did to achieve these truly amazing results for one of our agency’s clients.

    Facebook - Instagram - Сontent Сreation

    How to scale to 4 mln revenue with ROAS 9.5 in pandemic times

    We would like to share the cool results of one of our clients and reveal some tips and tools that our team has used to achieve success

    Testimonial

    Our Client Feedbacks

    ⭐️ ⭐️ ⭐️ ⭐️ ⭐️

    Our brand creates customized skincare products based on the clients DNA. It’s a pretty unusual niche with a specific target audience. Our marketing efforts had been a struggle before we met the AAMFunnel team. Not only did they help us build the right ads structure and find the right audience but also craft a much better USP. I highly recommend AAMFunnel team because these guys are seasoned pros, they know all about marketing, and especially Facebook marketing. My business wouldn’t have been where it is now without them. Working with them is a no-brainer if you really want to grow

    Seva Topolinskiy
    CEO

    Next Review Soon

    Next-generation Digital Marketing Agency

    We are a direct response digital marketing agency that leads eCommerce brands to a new level of success.

    Some business owners have no idea, but it’s as simple as that: once you’re able to earn 3$ from every 1$ spent, you’re on the highway to prosperity. It’s the best time to build the business of your dreams… And then enlarge it to an unprecedented scale.

    WE can help you to accomplish all this.

    our client wonderskin
    our customer jean patrique cookware
    our client jowissa
    our client August Berg
    our client jowissa
    our client Griffon Socks
    our customer jean patrique cookware
    our client is biorepablic
    Get in Touch

    hello@aamfunnel.com

    We are always around for a chat!

    Social Links

    Keep up to date and follow us on social media

    © 2022 AAMfunnel. All Rights Reserved.